IBM boosts earnings estimate, but revenue drops
IDG News Service - Citing improved profit margins and a stabilizing IT spending environment, IBM revised its 2009 earnings estimates upward Thursday, even as the company's revenue dropped.
Revenue was $23.6 billion for the company's third quarter, ended Sept. 30. That's down 7% year-over-year, but ahead of analyst expectations, according to those polled by Thomson Reuters. Analysts had expected revenue to be $23.4 billion, down 8% year-over-year, Thomson Reuters found.
IBM said it is operating as a more profitable company -- earnings per share were up 18% at $2.40 per share this quarter -- but revenue in the company's enterprise product lines was down, reflecting the conservative IT spending patterns that have gone hand-in-hand with the global recession.
Hardest hit was IBM's mainframe group, where revenue was down 26%. The company's Unix business was down 10%, and storage revenue dropped 13%. IBM's Intel-based System x servers were up 1% for the quarter.
IBM is planning major revisions to its Unix and mainframe product lines next year, said Mark Loughridge, IBM's chief financial officer, during an earnings conference call.
Things looked better with the company's Global Services and software lines of business. Global Services revenue dropped 7%, but the company continued to squeeze out profit-margin improvements there. With software, the drop was 3%, most of which IBM attributed to fluctuations in international currency rates.
"Software had a really terrific quarter," said Loughridge. He cited a 2% sales increase in the company's main middleware products such as WebSphere, Tivoli, Lotus and Rational product lines.
Although the company's server business was down, it did slow its rate of decline and posted "significant share gains," taking business from both Sun and Hewlett-Packard, Loughridge said.
IBM's Unix business has benefited from uncertainty over Oracle's planned acquisition of Sun Microsystems, wrote Sanford & Bernstein analyst Toni Sacconaghi in a report filed ahead of the earnings results
Last quarter Sun's Unix revenue dropped 40%, year-over-year, and some of that loss may have led to market-share gains by IBM. Checks with Sun customers "point to continued customer uncertainty and hesitancy surrounding Sun, particularly in larger, direct sales," wrote Sacconaghi. He believes that IT spending is improving in the U.S. and stabilizing in Europe.
Loughridge agreed that the IT spending climate has improved over the past year. "As we look at the economic environment currently ... it's really stabilized," he said.
IBM now thinks it will do better for the full year than previously expected. It revised its full-year 2009 earnings guidance upward 15 cents per share to $9.95 per share.
- VDI and Beyond: Addressing Top IT Challenges to Drive Agility and Growth This paper explores a collection of compelling FlexCast services to highlight how XenDesktop can drive a modern, mobile workforce toward greater agility and...
- Mission Critical: Managing Mobile Applications & Content Smartphones, tablets and other mobile devices have become embedded in enterprise processes, thanks to the consumerization of IT and a new generation of...
- The Challenges and Opportunities of Mobile Application Development Nearly all business users now demand mobile devices--their own or company-owned--along with anywhere access to corporate applications and data. What turns mobile devices...
- Maintain Less. Create More. Spend less on maintenance and spend more time creating with Red Hat Enterprise Linux. Read on to learn how Red Hat can help...
- On Demand: Mastering the Art of Mobile Content Management Mobile device usage in the enterprise has skyrocketed, and it continues to escalate. IT must answer to users who demand access to their...
- What should I look for in a Next Generation Firewall? SANS Provides Guidance With so many vendors claiming to have a Next Generation Firewall (NGFW), it can be difficult to tell what makes each one different.... All Management White Papers | Webcasts